Here's a list of 10 stocks that -- irrespective of the budget reforms -- should be attractive investments for a medium to long term.
The Indian markets are typically in a volatile trading cycle, just ahead of the Budget 2005-06.
With profit-booking seen at each time the stock markets touch a high, stock picking for a retail investor has become that much more difficult. The foreign fund influence is that much stronger, with net inflows of $1.82 million in calendar year 2005.
The figures with the Securities and Exchange Board of India reveal that these funds have been extremely active with gross purchases of over $4.19 billion and gross sales of over $2.47 billion.
Domestic funds and institutions have been largely sellers and it could be a worrisome scenario in coming months, if the local players do not come in to support the market. The post-budget scenario becomes that much more critical if the reform process slows down due to political pressure from left-wing parties.
Our market intelligence suggests that the oil & gas, fertilizer and banking stocks could see a boost in the coming budget.
Investors must understand that the markets have run-up early this year. Though it is not a pre-budget rally, the markets could take a dip in the post-budget period.
We, thus, present a list of 10 stocks that -- irrespective of the budget reforms -- should be attractive investments for a medium to long term.
Bharat Heavy Electricals Ltd (BHEL)
BHEL is one of the largest engineering enterprises of its kind in India and the largest domestic capital goods manufacturer in India and the 12th largest in the world. As a part of forward integration strategy the company plans to enter into the power distribution business.
BHEL has recently bagged a Rs 84 crore contract to set up a 58 MW combined cycle power plant in Tamil Nadu. The stock looks good for a medium to long-term horizon and even if the privatisation plan for BHEL is not announced at the upcoming budget, this is not ruled out in the near future.
East India Hotels
EIH Limited, founded in 1949 is the flagship of the Oberoi group of companies and is the second largest hotel chain in India. The company posted strong quarterly earnings, with a 231 per cent growth in net profit to Rs 21.97 crore for December-end quarter compared to Rs 6.63 crore for the corresponding quarter a year ago.
From a technical viewpoint, the stock appears ready for an upside. The scrip gave an upward bar reversal, surged ahead to overcome the 55 Week EMA and is currently moving in an upward sloping channel while East India Hotels is on the verge of resuming its long term uptrend indicating further upside from these levels.
Gujarat Narmada Valley Fertiliser Company (GNFC)
One of the large state-owned fertiliser and chemicals major, GNFC has branched out into related areas. Despite interruptions in business at one of the plants, GNFC has posted a 218 per cent rise in net profit at Rs 56.02 crore for the December-end quarter against Rs 17.57 crore for the in the corresponding quarter a year-ago.
From a technical level, currently GNFC has overcome a supply line and with not only the weekly but also the monthly oscillators reflecting strength, a further upside cannot be ruled out.
Hindalco
Although priced high, the metal major is set to benefit in coming months. Hindalco's aluminium division is set to benefit from a surge in aluminium prices, while its copper business should gain from improved TC/RC, production ramp-up and mine acquisitions. We feel the stock could perform well over a medium term.
Metal analysts say aluminium prices in FY06 will be 9 per cent higher y-o-y after hardening 19 per cent y-o-y in FY05F. The demand at the global level will be strong even if production levels could be hit by input constraints.
Hindustan Oil Exploration Company (HOEC)
One of the lesser known oil companies, HOEC has seen a flurry of corporate developments with Burren, a UK-based oil exploration and production company (focused on the Caspian region and West Africa), acquiring management control in HOEC by buying out Unocal Bharat's 26 per cent stake in the company.
Unocal Bharat is the Indian subsidiary of US energy major Unocal. Burren has finalised details of the open offer to HOEC's shareholders.
From a technical viewpoint, HOEC ultimately peaked at an intra-week high of Rs. 99.00 during the week ended December 29, 2004.
Currently HOEC has given an upward breakout from a consolidation phase on the weekly chart indicating its intention to commence an intermediate uptrend.
Indian Rayon
Indian Rayon, an Aditya Birla group company reported steady quarterly earnings with a rise in its net profit at Rs 28.65 crore in the December-end quarter compared to Rs 28.56 crore in the corresponding quarter a year-ago.
The garments division has maintained its market leadership. Revenues have grown by 28.9 per cent to Rs. 129.90 crore against Rs. 100.80 crore recorded in the corresponding quarter a year ago.
Overall, the outlook for Indian Rayon is optimistic given the strategic thrust, the buoyancy in the market and the capex initiatives taken in each of the businesses.
Max India
Max India Ltd., a mid-sized drug maker and healthcare provider, appears to be a strong player with diversified business interests from healthcare to infotech and life insurance. We are of the view that Max India would gain over the medium term from its life insurance business, where there is greater growth potential.
The Max India board recently said it was considering selling its VSAT and broadband unit (of Comsat Max) to Bharti Infotel Ltd, a wholly owned subsidiary of Bharti TeleVentures, for a total consideration of Rs 350 million.
Oil & Natural Gas Commission (ONGC)
The state run oil major has turned into an aggressive player, with media reports stating that ONGC will bid for the two refineries HPCL and BPCL. While the ONGC board has still to clear this proposal, ONGC has made presentations to concerned ministries for the restructuring of the industry.
With revenues of over 45,000 crore and large cash reserves, ONGC looks to be one of the strong medium-term stocks. Reports of a further liberalisation in the oil & natural gas sector is expected in the upcoming budget.
Reliance Capital
A Reliance group subsidiary, it is one of India's leading private sector non-banking financial services companies (NBFCs) and is likely to maintain its focus on infrastructure investments and insurance sector. Reliance Capital is expected to be a strong stock from technical charts.
The scrip entered a corrective phase in mid-July last year and declined to post an intra-week low of Rs. 107.00 on July 9, 2004 where strong support from the 55 Week EMA prevented any further downside.
Currently the Reliance Capital stock has just given an upward breakout after moving sideways in a rectangle formation for the past 24 weeks roughly between Rs 130 on the downside and Rs 147 on the upside.
Reliance Industries
A stock which we had recommended in early December 2004 when the ownership feud between the Ambani brothers was at its worst, it has performed well and gained nearly 4 per cent since then.
We believe that whatever be the outcome of the ownership battle, the fundamental story for the India's largest private sector group is strong. There is a possibility that the Reliance issue will get resolved sooner than expected and the stock could see higher levels.
From a technical viewpoint, currently Reliance Industries is on the verge of overcoming the supply line and with the long term picture turning positive, a further upside on a weekly close above the aforesaid supply line seems like a distinct possibility.
Morpheus Inc is an independent investment intelligence services firm based in Mumbai. It provide investment advisory services and specialises in technical analysis products, stock markets training modules, derivatives trading strategies and financial news analysis.
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